2018 (8) TMI 494 - AT - Service Tax

100% EOU - Refund of service tax paid - input services - denial on the ground of nexus with the output service provided by the appellant - Held that - With regard to establishing the nexus between the input and output services, the Tax Research Unit of CBEC vide letter dated 16.3.2012, has clarified that the new scheme introduced by substituting Rule 5 does not require the kind of correlation between exports and input services, which were hitherto provided under the unamended rules. It has been further clarified that service tax paid on the input services will be entitled for refund, on the basis of the ratio of the export turnover to total turnover. Since the TRU has clarified the legislative intent behind the amendment of Rule 5 of the Rules, explaining that no nexus need to be established, denial of refund benefit on sole ground of non-establishment of nexus cannot be sustained for judicial scrutiny - The refund benefit denied to the appellant in respect of those disputed services is not proper and justified and the appellant should be entitled for the benefit of refund of service tax paid. Nonsubmission of invoices - non-payment of value of services to the overseas vendors and non-submission of document - showing payment of service tax on the import of services - Held that - The relevant documents are presently available with the appellant, which have also been produced by the learned Advocate during the course of hearing. However, since those documents are required to be verified by the refund sanctioning authority for consideration of the benefit of refund, the matter should go back to the original authority for the purpose of verification of those documents/records for extending the refund benefit to the appellant - the matter is remanded to the original authority for passing of fresh adjudication order with regard to the documents, which were not produced at the time of original proceedings. Appeal allowed in part and part matter on remand.

Summary

Issues:
Denial of refund benefit under Rule 5 of the Cenvat Credit Rules, 2004 on various taxable services provided by the appellant.

Analysis:
The appellant, engaged in providing outsourced services, filed refund applications under Rule 5 for service tax paid on input services used for exporting output services. The authorities denied refund on services like renting of immovable property, cleaning, works contract, etc., citing lack of nexus with output services and non-compliance with invoice submission and payment proof requirements. The appellant conceded non-contestation for certain services due to minimal amounts involved. The appellant argued that since all output services were exported, the nexus was established, citing amended Rule 5 provisions and a CBEC letter clarifying no nexus requirement. The Revenue contended that the disputed services didn't align with the amended input service definition. The Tribunal held that denial based solely on nexus absence was unjustified, as per the CBEC clarification, and granted refund for disputed services.

The Tribunal upheld denial of refund for services like catering, event management, etc., as the appellant didn't contest. For services with disputed nexus, the Tribunal found the services were used for exported output, meeting Rule 5 requirements. The Tribunal noted that while the appellant failed to comply with procedural rules, the denial based solely on nexus absence was incorrect. The Tribunal referred to the CBEC letter clarifying the legislative intent behind the Rule 5 amendment, emphasizing no nexus requirement. The Tribunal remanded the matter to the original authority for verification of documents related to invoice submission, payment to vendors, and service tax payment on imported services for extending refund benefits.

In conclusion, the Tribunal granted refund for services with disputed nexus, emphasizing the legislative intent behind the Rule 5 amendment and the absence of a nexus requirement. The matter was remanded to verify documents for compliance with procedural requirements.